Reflecting on the past to determine new ways to be successful in a challenging economy.

By Chris Bernat, Vapor Apparel/Source Substrates

Do you remember the gas lines of the early 1970s? At the tender age of four, I can remember sitting for hours in my grandmother’s green VW station wagon, playing “go-fish” as we slowly moved forward to get our 10 gallons of precious petroleum. Everyone was in it together: No air conditioning, no credit-cards at the pump and no way to avoid the long lines.

If you don’t remember the gas lines, perhaps you can recall the 10 to 12 percent mortgage rates that sucked all the disposable income out of the economy? The cost of money was painfully high, and small businesses across the nation had to work harder and smarter to survive, let alone thrive.

In the 1970s, the American economy was being held hostage by an oil embargo, accelerated inflation, high unemployment as well as a lack of core growth and innovation. You can ask anyone doing business back then — it was no fun.

Fast forward to the 1990s
The US economy has enjoyed one heck of a solid run. With the exception of a short recession here and there, the economy enjoyed one of the longest expansions in its history. This unprecedented expansion coupled with a well-orchestrated “soft-landing” continued to provide healthy growth in the gross domestic product well past the end of the decade and into the new millennium.

Everyone hailed Alan Greenspan as an economic genius. The average American grew their net worth, and enjoyed a robust stock market and historically low inflation. Home ownership was at record levels. These were great times for business.

If that wasn’t enough to get things moving, the Internet and information technologies dramatically increased productivity in businesses of all sizes. Companies’ benefited from their newfound ability to find and support new markets for their products and services, simply with the click of a mouse. Communication costs went down. Access to cheap capital was readily available. Energy costs were artificially low. Real estate prices were on a steady rise. The US dollar was strong. Business in general was certainly “user-friendly.”

Next Stop: 2008
Now those frothy days are apparently gone. We are facing a number of significant short-term issues, including an uncertain global economic environment, ongoing weakness in the US dollar, historically high federal deficits and real inflation in everything from the price of oil to the cost of milk.

For people who don’t remember the gas lines and stagflation of the 1970s, this may be the first challenging economic environment they have ever faced. So what do you as the leader of your company? Do you just sit there, stare at the phone (waiting for it to ring) and make no adjustments to your short-term business strategy? Of course not! You tweak your model and improve operations. You seek new revenue opportunities. If you don’t, your company may go the way of the dinosaur.

When the Going Gets Tough -— Market Share Moves
Louis Gerstner, the chief executive who resurrected IBM from 1993 to 2001, would often tell his senior management team that tough markets were the best markets.

“In tough markets,” he said, “there is nowhere for weakness to hide. In tough times, market share moves from the weak to the strong.”

During his tenure, Gerstner grew IBM’s consulting services into a multi-billion dollar revenue stream, improved software margins and delivered significant value to its shareholders. He and his team accomplished all of this at a time when hundreds of upstart companies were attacking IBM’s historic dominance in the marketplace.

As we enter 2008, it looks like Gerstner would feel right at home. In addition to delicate credit markets, a likely recession and real inflationary pressure, businesses need to overcome the consumer’s perceived loss of economic control, high debt levels and general reduction in paper net worth. The American consumer cannot avoid hearing bad news from the media. From the sub-prime mortgage fiasco to the bulging trade deficit, bad news is plentiful. But in this mix of issues lies real opportunity.

The Paranoid Survive
Andy Grove, the former CEO of Intel Corp., is famous for saying “Only the paranoid survive.” He may be right. Never satisfied with his company’s dominance of the micro-processor industry, he often warned that “success contains the seeds of its own destruction.” He also recognized the prime responsibility of a manager is to constantly guard against other people’s attacks on your market position.

If you count yourself among the long-term paranoid, you may have already taken steps to protect your organization during tough times. If that is the case, then congratulations. For those of you who are new to this fear-factor, here are some strategies and tactics to ensure you and your team not only survive, but flourish in 2008 and beyond.

Diversify
Finding new revenue streams is an essential part of building security in your business. Alternate revenue streams are critical tools for tougher markets. You will continue to see companies in the digital printing market diversify. This may take the form of new markets, new customers or new products and services.

Everyone is doing it. Consumable manufacturers will offer end-customers equipment, installation, service and support. Traditional value-added distributors will add print-for-pay and “overflow print services” to their customer base. Traditional decorators are adding products. Sign producers are adding T-shirts and have been for a few years. But diversification also can threaten historically loyal partners, customers and relationships. You need to ensure your partners understand the adjustments to your business model and try to manage any concerns they may have.

Diversification also must make sense. It is not something you do on a whim. It requires planning and significant accountability. Everyone gets excited when new revenue is a priority. But excitement alone will not cause success. Leadership must help guide revenue diversification. It requires daily focus. But more than anything else, it should maximize your core competencies.

Offer Outstanding Customer Service
People don’t buy things. They buy from other people. Relationships are what separate the wheat from the chafe in tough markets. Service is the difference. Delivering outstanding service requires training and employees who really care.

It is the consultative sales team that ensures relationships are strong and not linked to a specific individual. Every member of your team must work extra hard to make customers feel good about their purchase decision. Fruit baskets will not cut it if your customer service reps have a flippant attitude with customers. Outstanding customer service is a daily activity, not a one-time thing.

To foster passionate service, you should highlight when it makes a difference and empower your front-line employees to make decisions that help customers stay loyal. Customer service representatives can be the difference between growing the business and shutting the doors.

Intensify Sales and Marketing
Focus on the people who have already decided to buy from you. A wise man once said, “In tough times, focus on the people who have already decided they want to buy from you.” This is a good strategy as long as you can grow your marketing efforts at the same time.

Tough markets are not the time to cut spending on sales and marketing efforts. It is the time to make sure you can measure the effectiveness of your sales and marketing expenditures. If your sales leadership shies away from being “measured,” it may be time to rethink who’s in charge of revenue growth.

Adopt Cutting-Edge Technologies
At the end of the day, it is all about profitability. You can increase profits without growing revenues. While it may not be easy, it can be done by creating efficiencies in operations and pulling costs out of services. It is essential that quality stay high.

The Internet and mobile communications are ways many companies have improved their bottom line. Anyone with a Blackberry can understand just how much more you can do each day if you are empowered with the right communication tools.

A properly equipped sales representative can answer e-mails, process a couple extra purchasing orders and work the treadmill at the Marriott without skipping a beat. There are new ways to improve operations every day. Pay attention to new ideas and concepts your vendors bring to you.

Stay Focused
Don’t forget how you got to this point. So much of being successful during tough times is remembering how to simply block and tackle. The desire to create new revenues streams should never be at the expense of your core business. To the contrary, maintaining your core focus should uncover new opportunities to help your customers as they face the challenges of the new economic landscape.

No one expects the next few quarters to be easy, but they may help you assume a new position in the market. For those who stay focused on quality and accuracy, 2008 will be a year that helps them separate themselves from the rest of the players in their area of expertise.

If there is one last piece of advice that all companies should consider for the rest of 2008, it is to maintain a tight focus on customer credit. There is only one thing worse than not getting the business; it is getting the business, doing the job and not getting paid for it. Watch your accounts receivable. Don’t let customers slip on payments. Treat your customers with respect but expect timely payments in return.

Chris Bernat, a Partner at Vapor Apparel/Source Substrates, has written on mass customization for SGIA and other industry publications. He is a contributing writer for Impressions Magazine and other periodicals on the topics of sublimation and customization.
chris@vaporapparel.com

This article appeared in the SGIA Journal, 2nd Quarter 2008 Issue and is reprinted with permission. Copyright 2008 Specialty Graphic Imaging Association (www.sgia.org). All Rights Reserved.